Asos Rebounds Over Holidays With Strong Black Friday Sales

(Bloomberg) --

Asos Plc bounced back from a poor Christmas a year earlier with strong growth over the holidays driven by Black Friday sales.

The U.K. online fashion retailer said its group retail sales grew 20% on a constant-currency basis in the last four months of 2019, better than analysts expected. The shares rose as much as 12%.

The better showing over the holidays was a sharp turnaround from 2018, when Asos stunned the market with a profit warning after poor sales in November. Its performance then was impacted by a badly executed Black Friday in which rivals such as Boohoo Group Plc offered bigger discounts and its own-label products failed to capture the imagination of young shoppers.

Asos is increasing its marketing, improving the design and availability of products and working more closely with social media influences to lure shoppers, Chief Executive Officer Nick Beighton said in a statement. It has also been working to increase the number of customers using its website. Total orders were up 20% at 27.7 million during the period.

Sales were up more than expected in every region in which Asos operates, including the struggling U.K. retail market, where revenue rose 18%.

“It is still early in the year and much remains to be done, but we are encouraged by the progress we have made so far,” said Beighton. “We remain confident in our ability to capture the substantial opportunity ahead of us.”

Asos’s performance should ease some concerns about the company’s prospects, though it fell short of the growth at smaller rival Boohoo, which raised its forecasts after a record holiday season and a sales increase of more than 40%.

Asos has been a volatile stock, fluctuating from a high of more than 4,000 pence to a low just above 2,000 pence last year.

Asos’s efforts to seek and retain customers have lowered profitability. The company’s profit margins were more than 4% a few years ago but fell to about 1.3% last year.

“This is a reassuring trading update with a beat to revenue, offset by gross margin investment,” said Greg Lawless, an analyst at Shore Capital. “The trick will be in getting balanced growth to leverage the group scale and rebuild operating margins.”

To contact the reporter on this story: Deirdre Hipwell in London at dhipwell@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier

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